Significance of MUDRA Bank

08 Apr 2015 (AIR News Analysis)

Significance of MUDRA Bank

Participants: Prof B B Bhatachariya, Noted Economist and Sanjay Thappar, Economic Journalist.

To push financial inclusion – big step – aide employment, spur growth, help underprivileged to get credit; How do you see this?

In principle – very good idea – much of industrial employment generated in MSME with micro credit – at present the big corporate utilize the bank funds;

1.     Critical question is now on the corpus whether it is solely form Govt or in fusion.

2.     Term & conditions of the loan;

Expected that 5.77 crore Small business enterprises would be benefited – would it affect the NPA of the banks – corpus of the bank to be 22k crore proposed by PM – in the current scenario of micro lending/ MFI in rural areas – will it enhance?

Micro credits are given through commercial banks but they are not specialized in that. In other countries Grameen bank (Bangladesh) – India to need such specialized banks;

First thing is to create an institute.

Secondly it should be ensured to function professionally – effective productive investment;

We already have SIDBI, SME banks.. etc Reports of coercing the lender on financial lines – borrowers end target – suicide cases – will it do away with such Coercive tactics?

Credit is not a grant – it should be repaid – success full stories of Micro financing depends on the 99% recovery; micro funding – high level difficulty in assessing the credential;

Largely, what will be the structure of the bank – in terms of capital accumulation?

Probably commercial bank & other financial institution will be asked to contribute some share – 1500 Crore – this would be the corpus/loan – they are not directly lending - they contribute fund through MUDRA bank – nominee of the commercial bank will be in the board of director;

Administrative part - Who will control it?

It should neither be bureaucratic nor under political influence; it could be completely immunized – be autonomous – prevent issues like ‘loan mela’ there by avoid defaulters;

Reluctance of RBI?

It would be a separate institution – neither under RBI nor under finance ministry; It should be a separate professional institution;

RBI can do Financial Audit not management;

Importance to promote micro financing/ funding?

Indian Corporate sector is very poor – 90% of the employment is in unorganized (including Agri, SME…) – so it is an urgent need to shift;

Micro Units Development and Refinance Agency MUDRA bank

FUNDING PUSH Primary product of MUDRA will be refinance for lending to micro businesses and units. The initial products are:

·         SHISHU: Covering loans up to Rs 50,000 ·         KISHOR: Covering loans above Rs 50,000 and up to Rs 5 lakh ·         TARUN: Covering loans above Rs 5 lakh and up to Rs 10 lakh MUDRA's role will include: ·         Laying down policy guidelines for micro enterprise financing business, registration of MFI entities ·         Accreditation, rating of MFI entities ·         Laying down responsible financing practices to ward off over-indebtedness and ensure proper client protection principles and methods of recovery ·         Development of standardised set of covenants governing last-mile lending to micro enterprises ·         Promoting right technology solutions for the last mile ·         Formulating and running  a credit guarantee scheme for providing guarantees to loans and portfolios being extended to micro enterprises ·         Support development and promotional activities in the sector ·         Creating a good architecture for last-mile credit delivery to micro businesses

Also refer: http://www.icra.in/Files/ticker/SH-2015-H1-1-ICRA-Micro%20Finance%20Institutions.pdf

Spectrum allotment and call rate

27 Mar 2015

Spectrum allotment and call rate

Participants: Sadana Dixit, former member, Telephone commission and Praful srivatsava, PTI.

Specturm auction - Huge revenue to the government – around Rs.1 Lak 10 k crore – Books of telecom operation and financial impact on their performance – what benefit the public/consumer?

Tariff cannot be predicted now – it depends up on the Spectrum band they have taken and Two year moratorium period;

Investment – Capital Expenditure –

In the beginning, the spectrum in pan-India basis was Rs.1658 Cr but later Bharathi Airtel or Vodafone paid Rs. 21,000 Cr for limited circle – The rate is 12-13 times higher;

It’s because of the competition which had been shoot-up in the later stages;

Spectrum sharing – to – Spectrum trading;

Future opportunity for the telecom operators in India?

It has very low tariff ratio. Large number of prepaid Network.

New Telecom policy and new guidelines. It going bring a bounce to the sector. Tremendous scope in the rural areas; Optical fibre network plus Mobile broadband network;

What are the factors which keep the tariff lower?

1. Volume of service provided.

2. Value added services;

800 MHz bought earlier – didn’t get good responds.

Note: Minimum Reserve Price, Beauty Contest, Spectrum management policy under NTP 1999;

Read, Spectrum management in India

http://cis-india.org/telecom/resources/spectrum-management

Also refer:

TRAI consultation paper on Spectrum Auction

http://www.trai.gov.in/WriteReaddata/ConsultationPaper/Document/consultation%20paper%20spectrum%20of%20auction.pdf

TRAI consultation paper on OTT services (Net neutrality)

http://www.trai.gov.in/WriteReaddata/ConsultationPaper/Document/OTT-CP-27032015.pdf

To make CSS effective

28 Mar 2015

To make CSS effective

Participants: Prof. Amarjith Singh, IGNOU and KR Ramachandran, Senior Journalist.

To implement the DPSP – Five year plan – flagship programme;

1. Chief Ministers conference to review.

2. Programme on pan-India basis – Ex: MGNREGA, MDM, Swacch Bharat;

3. Counter-part Funding - sharing – Centre State coordination & cooperation;

4. Lack of proper monitoring – proper usage of

5. Lack of independent evaluation  - Chaturvedi committee;

6. NITI Aayog – Bottom up approach;

PM proposed to introduce corporate system in the government;

Read also, http://mhrd.gov.in/sites/upload_files/mhrd/files/upload_document/Write-up_on_Review_Meeting_for_Website.pdf

Legal protection against Environmental Pollution

19 Mar 2015 (AIR News Analysis)

Legal protection against Environmental Pollution

Participants: C K Varshini, Former faculty, JNU and Mohan sahay, Senior Journalist

National Green Tribunal – creating dirt in the railway tract is an offence; 2010 NGT created by the act of parliament – it can take any area whichever it considered to be polluting the environment; How it can contribute?

This is a decision based on the PIL – to keep the railway station & tracks clean; presently even the area near large metropolitan cities are pollution – distress/disgusting welcome to the tourists; Slum dweller, rack picker – vulnerable  to potential health hazards;

Chairman, Railway Board – commitment – as Railway Budget propose ‘Green Wall’.

Garbage bins in the railway compartment;

Two issues:
 - Non degradable packages. (Advertisement-cum-packaging in the recent years)

Patrolling party – to check polluter around the railway tracks outside the station.

Is the judgment a great deterrent? How it can be implemented? Warning the public?

Garbage bins in the compartment – should not be thrown in general pool – it needs to be processed;

Tribunal has judicial power – maximum 3 years jail and can impose fine up to Rs.1 crore;

 Burning of the dry green leaves is more toxic than the vehicle exhaust. Rather It should processed to manure;

Law is a means to end, not end in itself. People mindset & cooperation is essential;

Know more about NGT:

http://www.greentribunal.gov.in/history.aspx

http://www.greentribunal.gov.in/Writereaddata/Downloads/NGT-fin.pdf

Cabinet decision on Black Money Bill

18 Mar 2015 (AIR News Analysis)

Cabinet decision on Black Money Bill

Participants: Pranjuva guha Thakurtha, Economist and Deveshkumar Pandey, The Hindu.

Multi-prong strategy to check parallel economy – salient features?

Undisclosed foreign income & assets (imposition of new tax) bill, 2015 – String the two laws Money laundering Act (2002) and Foreign Exchange management Act (1992). Provide more teeth – to imposed penalty, imprisonment. Important element – 300% penalty and 10 years rigorous imprisonment, any undisclosed income is taxable at 30% plus surcharges;

Window given for the offender – voluntary discloser scheme? Escape prosecution?

Short term window;

to implement international treaties Automatic information exchange including

Proposal to strengthen the Benami transaction Act (in statute book since 1988) – dissuade people from illegally taking money outside India;

Stringent provision? Is it a step back to FERA regime? Whether govt. can bring back the stashed money outside India?

When India moved from FERA to FEMA – is to liberalized regime – to dissuade the people from violating the law – but it was other way around;

What about the countries like Tax haven? Is there any breakthrough?

Multilateral conventions – Tax haven (Low tax or No Tax regime) -80 hard Tax haven (Mauritius, Florida, ) – tax evasion, round tripping, money laundering - This issue need to be checked – it is complex; 90% of the black money generated stays back with in the country;

Instrument of Black money generation like Participatory notes? Whether these issues dealt in the bill?

No the bill is not specific in this regard; two things dealt Benami Act 1988 (framing rules after 25 years) and regulatory authority (SEBI/RBI) to establish audial lift corporate way;

Enforcement directorate are short staffed? Any provision to strengthen these bodies?

Quality of the staff (Adequate strength & Training) and Autonomy (Integrity);

Global financial Integrity – Estimate – India lost $430 Billion (Rs.28 Lac Crore) in the form of illicit outflow – between 2003 -2012;

SIT on Black money – advised for the better coordination of different enforcement bodies – any provision on these lines?

Also refer PRS summary of the proposed bill

http://www.prsindia.org/uploads/media/Black%20Money/Bill%20Summary%20--%20Undisclosed%20Foreign%20Income%20and%20Assets%20(Imposition%20of%20Tax)%20Bill,%202015.pdf

Unseasonal Rainfall & Impact

02 Mar 2015 (AIR News Analysis)

Unseasonal Rainfall & Impact

Participants: JS Sambra, CEO/ National Rainfed Area Authority, and Harveer singh, Editor.

Rainfall beyond certain level affect the quality & quantity of the production.

Westerly disturbances – unseasonal rainfall – in North India – Example: Punjab Haryana Hail strome – affect the standing crops;

It helps for the growth of forest, fodder etc;

Oilseed & pulse production – falls –more import required;

Information flow – communication – compensation to the affected farmers – safety net – insurance – popularizing it among the farmers;

Another safety net – introducing more livestock – diversification of income – tool against weather anomalies;

Two issues of Insurance:

1. Currently, Insurance is given for the Bank. It should focus farmers.

2. Problem in the estimation of loss. More transparency required – participative process;

Natural calamities contingency fund – Govt. should summit memorandum to the state – ** Flood (Home Affairs), Drought (Agri Ministry);

Precaution/Preventive measures:

1. Avoiding water stagnation.

2. Irrigation should be done based on the weather forecast.

16 Mar 2015

Impact of Unseasonal Rainfall on crops

Participants: Dr. JS Sambra, CEO/ National Rainfed Area Authority, and Harveer singh, Editor.

Kharif crop is not good – because of the rain – when the crops or the due for maturity/reap – anomaly due to climate change – industrialization, Anthropogenic activities; Ex: rotten potatoes due to stagnation of rainwater 15-16 days; Vegetable, Mangos affected by the hail storms;

Combined harvesting machine – cannot be worked when the field is waterlogged;

State wise analysis system – Eg. Gujarat Anawari system – satellite assessment must be developed;

Difficulties in the assessing of the damages – unseasonal rainfall, hail storms, high-speed wind; Helplines – to keep the farmers informed about the relieve measures;

Multi-crops, diversification, withstanding crops, livestock cultivation – loss can be prevented/ compensated;

Crop assessment schemes 

RBI Rate cut and impacts

04 Mar 2015 (AIR News Analysis)

Impact of RBI Rate cut on Inflation.

Participants: A K Gupta, Director/ Banker’s Training Institute and Sanjay Jha, Indian Bureau News, ITN News/London.

Key policy Repo Rate cut: 7.75 to 7.5 percent with immediate effect; Cutting Interest rate to boost growth; unexpected cut-down;

Effect on the loan, EMI?

EMI depends on 3 factors- cost of fund, negative impact of SLR/CRR, NPA, on return of the equity and expenses – these factors determine the bank’s Base rate. Interest rate will be reduced only if the rate of deposit is reduced;

Inflation 5.1% (Jan 2015) as measured by the new index (well within the target). How you see it in this context?

Monetary policy framework signed between the RBI & Government – 2 to 3 years down the line – to target the inflation rate around 4% - keeping the inflation in manageable limits;

Liquidity in the market?

Improve the borrowing by the bank much better; Borrowing of bank from RBI is only 1.5%; It will help more liquidity – reduced interest rates – but not to the inflation;

Oil prices, unexpected geopolitical events? In this context?

Inflation targeting vs Focus on the Growth?

Fiscal deficit target of 3% postponed a year (2017-18); coordination between the finance minister and the RBI governor;

Steps for Inflation targeting?

Subsidy cut, Investment Expenditure- Infrastructure development;

06 Mar 2015

RBI ease Home loan

Participants: Dr. Maharaj Kishan Butt, Maharaj Institute of Management studiesand Sanjay Thappar, Economic Journalist;

Govt. announced Housing for all Scheme –

How do you see this Rebate given by the RBI in terms of boosting ‘housing for all’?

Rs. 50 lac has been assigned in the last budget under PSL of the banking;

Reduction in the Repo rate is a good step. (Uplift the demand in the lower economic strata)

Passing on the benefit – RBI first target at the inflation – this would pass on further to increase demand – at present the demand for the residential apartment has be reduced to 35% in the important metros;

Private sector banks vs Public sector banks – role of passing on the benefit to the public/ costumer; How this can be done?

Make in India – demand macroeconomic business environment – easing the business –

Speculation like RBI decrease Key policy rate to further level. Will it happen?

Jan 2016 – depending upon the monsoon – policy rate might be further reduced;

$20 Bn target – investment by FII – Bond market will change with respond to the policy rate & oil pricing;  

Saving policy in the form of Insurance policy – reducing general exemption limits;

Also Note: From “RBI Monetary Policy” ‘https://www.rbi.org.in/scripts/PublicationsView.aspx?id=16216#II2’

Drivers of Inflation: Sugar prices moderated in consonance with global prices. However, prices of protein-rich items (eggs, fish, meat, milk and pulses) exhibited downward rigidity, reflecting structural mismatches between demand and supply.

Crude prices could impact economic activity and inflation in India through several channels: (i) higher real incomes for consumers; (ii) lower input costs, boosting corporate profitability and inducing investment; (iii) lower current account deficit (CAD); and (iv) improved market sentiment. These favourable effects could, however, be offset by weak global demand.

Also refer:

http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/CFS070114R_CF.pdf

http://rbidocs.rbi.org.in/rdocs/PublicationReport/Pdfs/PSGRE020315.pdf

SC on sec.66A of IT Act (prevention of offensive content on the internet)

24 Mar 2015 (AIR News Analysis)

Participants: Neraj Aurora, Cyber law Expert and Praful srivatsava, PTI

Supreme court landmark judgment.

In year 2008, IT act amended – Provision Section 66A inserted. It includes 2 parts

1. Publishing of offensive information or information which is grossly offensive or menacing in character.

2. Dealing with false information but impact of creating annoyance, defamation, insult, ill-will.. etc..

Four words, not defined: Grossly offensive, menacing character, annoying, inconvenience (subjected to interpretation – misuse by law enforcement agencies)

Two fold issues in front of the court / Judiciary.

1. Misuse by the law enforcement agencies.

2. Vague provision – unconstitutional in nature – sweeping interpretation – violate Art. 19 of Constitution of India.

Issues of Internet (without safeguard):

1. Anonymity.

2. Illegal/ defamatory content.

3. Hate speech.

4. Obscene materials.

Need of the hour – New provision – balance of interest - freedom of speech & Safeguard/protection from hate speech.

Legal protection against abuse & defamation:

File complaint under Sec. 499 & 500 of IPC – court of law – with evidence / proof;

Technical complexity: Tracing an IP of the perpetrator – under the court process;

Sec 79 of IT Act – grant exemption to the intermediary (ISP/FB/Website/Search Engine/Companies/ also include cyber-cafe) - IT intermediary rules – to make them comply with certain provisions;

Sec 66A of IT Act – expedite the process – to reduce damaging effect – cognizable offence;

Recent issues:

1. Sony Hack case – movie stolen - re-iterates the need for international law;

2. Assam case – obscene videos – server located overseas;

Section 505 of IPC acts – any analogy with sections of IT act – it talks about only the aggravated situation;

Govt. Proposal – Notification – reg. Sec 66A

1. All the violation of Sec 66 – form the part of IT Intermediary rules.

2. Social media websites should publish privacy policy.

3. Social media websites should maintain data for 3-4 months.